Over At The Oil Drum: China Talk and Energy -- Implications for the Bakken

A nice update on global oil production and demand. Bullish for Bakken oil.

It really is interesting how often the Bakken is mentioned in this article (or at least the comments) with regard to global supply and demand.

From the linked article:

... this has not been a particularly good month for that future. In August, the Alaskan pipeline pumped an average of 399 kbd from the North Slope. As winter approaches, that number needs to be above 350 kbd to ensure that there are no solids built-up within the pipe, and each year the numbers fall a little closer to that limit.  

Just this past week, Shell announced that they will not complete any wells in the Chuchki Sea this year, but will only partially drill a number of wells, and leave completion until next year. This despite the fact that the Arctic ice acreage fell to the lowest level in 33 years, the time over which these measurements have been made. 

Further, over in Russia, the promised development of the Shtokman field, postponed several times in the past, has again been put back on the shelf. The arrival of increasing quantities of shale gas, and the loss of the market to China have reduced the need for these supplies in the short term. At the same time, the Russian government is again seeking support from Western companies for developments in East Siberia and offshore. They are apparently still courting BP.

The oil drum notes:

• "the amount of investment being made in repairing the interstate highway system, and expanding the number of lanes bringing cars into the cities show that there is continuing commitment to automobile and truck transport in the USA"
• "there appeared to be more trucks on the road than I remember seeing in the past 3 or 4 years..."

I thought this was very interesting:

• ... the US economy will grow (albeit perhaps slowly) but it will be helped by low cost of natural gas BUT there remains a serious lack of viable alternative fuels to replace oil for transportation...
• ... and with no alternative, the demand for oil in America and Europe will be sustained ..
• BUT, the demand for oil will continue to rise in the BRIC countries where automobile use continues to rise...

That comment about "expanding the number of lanes on interstate highways" was very noticeable in the Los Angeles metropolitan area, where again, the "405" was shut down for an extensive period to widen the road; the "405" is THE corridor on LA's west side.

As usual, the comments are as good as the article.

There will be continued volatility in the price of oil, but the general trend is going to be up. The only question is how fast will the rise be?

So Much For Global Warming?

Or just an anomaly? Or portent for tough winter?

Duluth, MN, records first snowfall for the season -- earliest in 17 years; almost sets all-time record.

Encana: Mobile LNG Refueling Stations

Link here with great photos. It is amazing the solutions the folks in the oil and gas industry are coming up with.

A reader sent me this story. The reason I am posting it is because Heckmann has contracted with Encana for LNG refueling stations in some locations.

What We Will Be Talking About Monday; Possibility of Nice Dividend Payout Before End of Year; KOG, BEXP With Nice Wells; OXY USA With a Well;

While waiting for the NDIC site to post the new IPs (see below), some WSJ links:

This is a very, very interesting story (at least for me). I bike into Harvard Square almost every day. Yesterday, Sunday, I commented to myself that it looked like I was biking in a small Chinese city: the sidewalks were filled with strolling older Chinese (seniors, a bit older than myself, and my age). It appeared that the Chinese were the largest ethnic group in the Harvard Square area; it wasn't just senior Chinese, but also many university students. I tried to guess the second most prominent ethnic group: it was difficult. It wan't Caucasian, but I was not sure whether it was Hispanic. The Caucasians seemed to be about third in number. So, then this story on front page of section B in today's Wall Street Journal:

One in five people who took the GMAT last year was from China, according to a new report from the Graduate Management Admission Council, which administers the business-school entrance exam globally. The number of tests taken by Chinese citizens rose 45% from last year, to 58,196.

I don't have to remind readers that the Harvard MBA program is the most sought-after MBA program in the world (?). Google change in GMAT equation: Chinese flock to the test

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A reader asked where the new KOG acreage was: that's now been posted.

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RBN Energy: this is the first in a series about the Henry Hub (natural gas) -- it takes about ten minutes to read; nothing technical; and a great foundation for the entire series regarding pricing of natural gas through the "Henry Hub."

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Possible significant dividend payout before end of year from a number of companies.

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Wells coming off the confidential list over the weekend and Monday:

• 21078, 2,129, KOG, P Alexander 155-99-16-11-2-1H, East Fork, t8/12; cum --
• 21259, 270, Whiting, Duletski 21-13TFH, Gaylord, t7/12; cum 10K 7/12;
• 21871, 159, American Eagle, Cody 15-11-163-101, Colgan, t6/12; cum 18K 7/12;
• 21907, 3,779, BEXP, Shorty 4-9 1H, Stony Creek, t6/12; cum 42K 7/12;
• 21975, 781, Whiting, Duletski 11-13PH, Gaylord, t3/12; cum 20K 7/12;
• 22107, 285, CLR, Hoidahl 1-16H, Wildrose, t6/12; cum 6K 7/12;
• 22235, 539, CLR, Syracuse 2-23H, Banks, t6/12; cum 26K 7/12;
• 22259, 1,262, MRO, Ernest Charchenko 24-33H, Murphy Creek, t5/12; cum 28K 7/12;
• 22306, 2,180, Oasis, J O Anderson 52-- 31-28T, Camp, t5/12; cum 34K 7/12;
• 22549, drl, CLR, Sibbern 2-27H, North Tioga,
• 21520, 571, CLR, Carlton 1-7H, East Fork, t7/12; cum 14K 7/12;
• 21864, 561, Zavanna, Wells 6-7 1H, Foreman Butte, t7/12; cum 7K 7/12;
• 22136, drl, BEXP, Syverson 1-12 1H, Stony Creek,
• 22317, 1,818, BEXP, Arvid Anderson 14-11 4TFH, Alger, t6/12; cum 23K 7/12;
• 22470, 327, G3 Operating, Hought 1-31-30H, Little Muddy, t7/12; cum 3K 7/12;
• 22603, 728, Hess, EN-Hein-156-94-0112H-2, Big Butte, t6/12; cum 33K 7/12;
• 18593, 763, Oasis, Edwards 6092 42-35H, Cottonwood, t6/12; cum 17K 7/12;
• 21674, 156, OXY USA, Annie Oakley 1-20-17H-142-94, Murphy Creek, t3/12; cum 8K 7/12;
• 21854, drl, CLR, Maruskie 1-22H, North Tioga,
• 22321, 149, Corinthian, Corinthian Backman 1-34 1H, a Spearfish, North Souris, t5/12; cum 11K 7/12;
• 22506, 509, Petro-Hunt, Rossland 157-101-22C-15-1H, Otter, t5/12; cum 15K 7/12;

Plus these four that should have been reported on Friday, September 21, 2012:

• 20802, 328, Samson Resources, Charger 7-6-162-98H, Ambrose, t7/12; cum 13K 7/12;
• 21270, conf --> IA, Whiting, Brehm 13-27TFH, Sanish, cum 148 7/12; no production after two days; no file report yet;
• 22011, drl, Petro-Hunt, Wold 160-94-32A-5-3H, North Tioga,
• 22310, A, G3 Operating, Thome 1-31-30H, Climax, cum 11K 7/12 -- no test date/IP yet

“What’s it going to look like in 300 or 500 years?”

Updates

September 24, 2012: The original post linked to one of the more ridiculous stories that I have linked in the past couple of years. I was surprised that someone even bothered to post a comment (see first comment below). The reader suggested "oil and farming" was all that western North Dakota had to offer (I assume the reader was from eastern North Dakota; out-of-state readers do not know that there are two Dakotas, east and west, north of 45 degrees latitude, but I digress).

I responded that western North Dakota had more to offer, including hunting and fishing. A reader provided this link from USA Today, posted within the last 24 hours! Absolutely incredible!

More Americans are heading outdoors to hunt and fish for fun, reversing a two-decade-long decline among adults. 

Eleven percent more Americans (ages 16 and older) fished and 9% more hunted in 2011 than in 2006, according to a new five-year survey from the U.S. Fish and Wildlife Service.  

"What we see is a pretty significant change in direction," says Dan Ashe, the Fish and Wildlife Service's director, noting declines in prior surveys since 1991. 

He says the specific causes for the reversal won't be spelled out until the final report is issued later this year but adds: "There's a growing realization that doing things outdoors is healthy."

Just incredible. Incredible. No one will believe me but that was the sequence of events: a) reader comments; b) I respond with "hunting and fishing"; c) another reader provides link of a story that had just been published supporting my thesis; and, a story that I would have otherwise missed. What a great country.

Original Post

Two UND professors are studying the impact of man camps in the oil patch. See The Bismarck Tribune link.

“These man camps are only going to be there for 20 or 30 years, depending on labor needs,” Caraher said. “What’s it going to look like in 300 or 500 years?”

I can't make this stuff up.

For Investors Only: CVX and COP -- Room To Double Their Dividend

Two important stories / links here. First Motley Fool at the top; CNBC/Fast Money at the bottom.

Link here to Motley Fool.

We have identified ten stocks that have high dividend yields – those greater than 3% – that could afford to pay double their current dividend, i.e. those having less than a 40% payout ratio for the most recent quarter. 

Additionally, each of these companies also generate at least $4 of cash flow per share.  

The first companies on this list, Chevron Corporation and ConocoPhillips, are in the profitable oil and gas sector. Chevron pays a dividend yield of 3.1% and Conoco 4.6%, and both companies only pay about 30% of their earnings out as dividends. 

ConocoPhillips trades below its peers on a P/E basis at 6.7x, while Chevron trades at 8.7x, with the likes of Exxon and BP trading at 9.5x and 8.0x, respectively. 

While ConocoPhillips trades at a richer forward P/E at 10, versus Chevron of 9x, Conoco recently spun off its downstream operations, which may prove to accelerate the company over the next couple years.

Again, for investors only. Disclaimer: this is not an investment site; do not make any investment decisions based on anything you read at this blog. Another disclaimer: I have been invested in many of the companies mentioned at the link. I don't plan to purchase any new shares in the next year, except for automatic dividend reinvestment in some companies mentioned.

The Motley Fool article was posted September 23, 2012. I posted the possibility of CVX increasing its dividend on September 21, 2012.

CNBC/Fast Money suggests investors could see significant dividend payouts before the end of the year because of the threat of taxes going up significantly after the first of the year.

If the President Is Re-Elected ...

... link here.

If President Barack Obama wins a second term, the [coal export] issue will likely test his determination to curb the use of fossil fuels blamed for climate change, especially since his policies are partly behind miners' yearnings for Asian markets.

If the link breaks, google Analysis: Coal fight looms, Keystone-like, over U.S. Northwest.

No comment.

Pilot Flying J Truck Stop At The 13-Mile Corner North Of Williston

I don't recall posting this earlier or seeing it at the Williston Wire. A writer comments that Pilot is building a truck stop at the 13-mile corner north of Williston. This is an incredible location. Remember, Love's is also building north of Williston.

According to wiki:

Currently, Pilot Flying J is the largest purveyor of over-the-road diesel fuel in the United States. Pilot Flying J also is known as the largest Travel Center chain in the country with over 550 locations under the Pilot and Flying J brands. Pilot Flying J is also the third largest franchisor of quick service restaurants in the nation, offering one to three different concepts at each location, and is also the largest franchisee ofSubway in the world with over 200 locations. Unlike many travel centers and truck stops, the majority of locations with the Pilot Travel Centers brand do not utilize full-service dining.

Wow, it would be great if these truck stops would see a market for natural gas vehicles. I'm counting on Heckmann to raise the bar.

NOTE: first comment from "anon 1": Pilot Flying J is the key LNG truck stop partner for Clean Energy Fuels' Natural Gas Highway. Additional information in a SeekingAlpha.com article.

And, again, a huge "thank you" to a reader for alerting me to this development. I would be curious to hear what all is being developed at the 13-mile corner. The corner is in Tyrone oil field, just west of the East Fork field.

Just for the fun of it, there is one producing well right at the 13-mile corner, on the northwest side:

• 19048, 705, Petro-Hunt, Borrud 156-101-11D-2-1H, t8/11; cum 69K 7/12;

When I was a teen-ager (probably the summers between my sophomore and senior years of high school) I picked rocks on Dr Borrud's land a few miles north of the 13-mile corner on the east side of US Highway 85. It was the most back-breaking work I had ever done, but it was not the worst job I have ever had.

Oliver Field

Updates

November 23, 2012: CLR has permits for four more wells in a single section in Oliver oil field. These four wells will be on the same pad sited in section five but the Garner wells will run north into section 32/29; and the two King wells will run south through 5/8. There are already two producing wells there (#21027, running south; and #21715, running north; both of these wells are doing quite nicely).

• 24486, loc, CLR, Garner 2-32H,
• 24487, loc, CLR, Garner 3-32H,
• 24488, loc, CLR, King 2-5H,
• 24489, loc, CLR, King 3-5H,

And another Oliver field permit in section 21:

• 24492, loc, CLR, Raymond Federal 1-21H; I assume this well will be running north, 21/16. CLR has nice producing wells in the area; not monster wells, but nice nonetheless; looking at one well in the area, it looks like CLR is completing these wells with 30 stages, ~ 3 million lbs of proppant including ceramic;

Original Post

Oliver oil field is in northern Williams County, near Divide County. It comprises 36 sections, T157N-R98W; about six miles north of Epping; about 8 miles northwest of Ray, about 20 miles northeast of Williston. It's a relatively nice field, pretty much owned by Continental Resources and Hess.

• 19313, 1,135, Hess, Olson 15-36H, t11/10; cum 100K 9/12;
• 19318, 2,042, Hess, Hodenfield 15-23H, t2/11; cum 106K 9/12;
• 19550, 824, Hess, Weyrauch 15-11; t9/11; cum 102K 9/12;
• 20001, 414, Hess/American Oil; t11/11; cum 41k 7/12;
• 21014, 472, CLR, Marcy 1-24H; t12/11; cum 58K 7/12;
• 21027, 699, CLR, King 1-5H; t2/12; cum 48K 9/12;
• 21160, drl, Hess, GO-Biwer-157-98-2635H-1TA; well status PNS 8/12;
• 21626, 723, CLR, Hobart 1-27H; t8/12; cum 24K 8/12;
• 21639, 464, CLR, Sutton 1-3H; t3/12; cum 40K 8/12;
• 21743, dry, CLR, Colfax 1-19H, no information in well file as to reason "dry" (November 2012)
• 21778, 328, CLR, Cass 1-9H, t7/12; cum 19K 8/12;
• 21797, conf, CLR, Black Federal 1-28H,
• 21932, 394, Hess, GO-Biwer-157-98-2635H-1; t6/12; cum 19K 7/12;
• 21966, 339, CLR, Fairbanks 1-20H, t6/12; cum 22K 8/12;
• 21971, 662, CLR, Mathewson 1-30H, t4/12; cum 44K 8/12;
• 22135, 746, CLR, Washburne 1-22H, Oliver, t8/12; cum 31K 9/12;
• 22329, 747, CLR, Colfax 1X-19H, t4/12; cum 43K 81/2;
• 22579, 466, CLR, Marcy 2-24H, Oliver, t8/12; cum 16K 9/12;
• 22580, 240, CLR, Marcy 3-24H, Oliver, t8/12; cum 12K 9/12;
• 23044, conf, CLR, Black Federal 4-28H,
• 23045, conf, CLR, Black Federal 5-28H,
• 23705, conf, CLR, Pocasset 1-29H,

How Busy Is The Bakken Oil Patch? Grand Forks City Attorney To Help With Dickinson's Construction Permits

Link here to Dickinson Press/InsideClimate News.

Citizens waiting for construction plans to be approved in Dickinson may not have to wait as long as they have been if a pending agreement between the city and Grand Forks is approved by each city’s attorney. The agreement calls for Grand Forks to provide a helping hand in reviewing applications for commercial buildings and other large structures in Dickinson, easing up some of the stress on the city’s Planning and Zoning Department. The Dickinson department will still handle single-family dwellings and multi-units of three or less.

Go to link for more information on how this will work and what it will cost.


369 miles from A to B.

• A: Dickinson, North Dakota
• B: Grand Forks, North Dakota

It's interstate highway the entire distance.

Most Recent North Dakota Oil and Gas Lease Sale Result -- KOG -- Online -- Truax Oil Field -- $7,000/Acre

The most recent oil and gas lease, North Dakota state, on-line, August, 2012:

• 154-98-14, Truax oil field, 80 acres; E2NE4: $7,003/acre

Note: this is a "new" URL -- it was changed sometime in the past year. Some of my old links will, of course, be broken; I will correct them when/if I find them.

Folks may want to bookmark this new site. I believe the next quarterly North Dakota state oil and gas lease sale will be in November 6, 2012. The filing deadline was September 21, 2012.

A reader asked where this new KOG acreage is in relation to three other KOG wells:

• 18770, 819, KOG, Scanlan 3-5H, Truax, t9/10; cum141K 7/12; 
• 20856, 1,349, KOG, King 3-8H, Truax, t1/12; cum 38K 712;
• 20857, 358, KOG, Pankowski 4-6H, Three Forks well; Truax, t2/12; cum 48K 7/12; 

Using the Scanlan (153-98-5/4)as the reference point:

• King is one mile directly south (153-98-8/9)
• Pankowski is one mile directly west (153-98-6/7)
• The new acreage is almost exactly 5 miles to the northeast (154-98-14)

Remember: the Pankowski started out as a middle Bakken well; due to problems, the decision was made to target the Three Forks formation. 

Random Note on New Frontier Midstream -- In the Bakken

I don't recall posting anything about this company previously, although it's possible. Whatever, it's posted now, alerted by a reader. Thank you.

New Frontier Midstream, LLC

First, the press release of June 27, 2012:

• to build a new 65-mile natural gas pipeline (6") and parallel crude oil pipeline (8") in southwest ND
• $250 million project: natural gas, crude oil, NGL, and produced water infrastructure
• products from Bakken, Three Forks, and Lodgepole
• from Stark County, ND, to Fallon County, MT
• finalizing site location near South Heart, ND: a new 40-million cubic feet per day cryogenic plant
• will tie in with ONEOK's gathering system, including the Williston Basin Interstate Pipeline (NG)
• first phase to be complete by 2Q13

For comparison's sake, the ONEOK cryogenic facilities in North Dakota are 100-million cfpd

Eckard Global, LLC, is the holding company. It is now operating primarily in North Dakota and Texas; previously in Alabama and Louisiana.

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Note to newbies: when I started this blog, I purposely avoid talking about natural gas. I didn't understand it and the Bakken was considered an oily field, not a gassy field. I had to add a "NG" page tab at the top as one way to manage the NG posts. I have not updated that page in a long time.

Interestingly enough, liquid natural gas is now a big story in the Bakken. It looks like it will be getting bigger. There is a significant amount of chatter suggesting that "natural gas will break out" in 2013, and that there will be a substantial rise in the price of natural gas next year.

I may not "understand" natural gas much more than when I started blogging, but whatever I think I know, I have to thank a) RBN Energy, and, b) my readers for alerting me to some great stories.

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Note to the Granddaughters

It is likely that one of our two granddaughters will enjoy sailing when she grows up. I hope I'm right and I hope I live long enough to see that.

Right now I am reading a fascinating biography of the Atlantic Ocean, by Simon Winchester, c. 2010, reading from an "uncorrected proof, not for sale" edition. For those interested in biographies of great sea bodies, an even more impressive biography is The Great Sea, by David Abulafia, the story of the Mediterranean Sea. I have posted some notes on this book, which I purchased this past year at Books on Broadway in Williston.

Perhaps the most fascinating story that connects both the Atlantic Ocean and the Mediterranean Sea is the tale of the murex snail. I thought I had posted a fairly long history of the "murex" somewhere on this blog, but I can't find it now. Perhaps it was posted on the original MDW blog which was deleted with a single keystroke a few years ago. Maybe I will try to re-create that post some day.

[murex snail --> 1892, bulk oil tanker --> Murex oil company (North Dakota)]

Other fascinating trivia is how much our general conversation tracks back to great ocean events of the past. I suppose I am the only one who did not know this, from Simon Winchester's book, p. 126:

All five of the space shuttle fleet were named after pioneering surface ships, two of them American, three British. Columbia was named to honor the first American vessel to circumnavigate the world, Atlantis after a stalwart research vessel of the Woods Hole Oceanographic Institute in Massachusetts...Discovery and Endeavor, the latter deliberately spelled in the English manner, both carried James Cook on his eighteenth-century global navigations; and Challenger was named after the ship of the 1872 - 1876 voyages. 

And I know I was the only high school graduate to not know that the HMS Challenger was a corvette, nor even what a corvette is/was.

The older granddaughter (age 9) wants to be a marine biologist. The great oceanographic institutions are (name, location, established): Scripps, California, 1892; Woods Hole, Massachusetts, 1930; Lamont-Doherty, New York, 1949; and, the National Oceanography Centre, Southampton. Smaller European ocean stations are located in Roscoff, Kiel, and Heligoland.

Prince Albert 1 of Monaco was fully invested in field oceanography; the International Hydrographic Office has been in Monaco since 1921.

From page 147, the Atlantic Ocean begins:

... to be pedantic about it, in the lakes of Zambia (where the Congo rises) and in the Swiss Alps (where a glacier drips to form the tributaries of the Rhone). It also begins in a valley near America's Yellowstone National Park, where a late Victorian explorer named Bruce found the source waters of the Missouri River, and beside which today a Greek farmer, a long way form his old home beside the Mediterranean, lives out his life as an American rancher, raising sheep.

Wow.

I do not know if this is related, but it is intriguing:

The 13-mile section [of the Gallatin River] between Greek Creek and Spanish Creek along the Gallatin are Class 2 to 4 rapids. 

From the net:

Unbeknownst to most anglers, the Gallatin River served as the stunt double for the Big Blackfoot River during the filming of Norman MacLean’s, A River Runs Through It. One of the three forks of the Missouri, the Gallatin was named after Albert Gallatin, the Secretary of the Treasury during the Lewis and Clark expedition. 

I would not have posted that little bit of trivia except for fact that A River Runs Through It is one of my younger daughter's favorite movies, and perhaps connects the two of us as much as anything.

Simon Winchester has made an excellent observation, starting on page 149, connecting the Atlantic Ocean with Shakespear's final work, The Tempest. It is one of several Shakespearian plays I have not yet read; I am familiar with the play for any number of reasons, but with the Winchester observation, it becomes even more intriguing. When I read the passage he writes, suggesting that Shakespeare heard the study of a shipwrecked boat in the Bermudas that led to his writing the play, the name "Henry James" flashed in front of me. There is no reason, no connection, except perhaps the incredible ability of great writers to take a single (sometimes mundane, sometimes not) data point and develop it into a great play or a great novel.

Replies Welcomed: CNG/LNG Vehicles in the Williston Basin

A reader sent the following by comment: curious if anyone has any input.

I am curious about the interest in CNG/LNG vehicles in the Williston Basin. 

I have been studying the status and potential of the market, in ND and elsewhere, and the roadblocks. 

Maybe other readers will comment. I hope so. Specifically: 

1. Do you, or your businesses use CNG now? 

2. If not, do you or your businesses plan to use CNG in the future? 

3. If not, do you, or your businesses, want CNG vehicles? 

4. If yes, what motivates you, or your businesses? 

5. If not, why not? 

6. What price is needed to motivate you (if any will)? a. Equal to gasoline or diesel is enough. b. At least ____ % less than gasoline or diesel is required. c. Up to ____ % less than gasoline or diesel is OK. 

7. Do you know enough about CNG vehicles to have a firm opinion? 

8. What are your main questions about CNG vehicles? 

I have the same questions for LNG.

It seems one might start with Heckmann/Power Fuels. I am really eager to see if/how Heckmann affects the CNG/LNG trucking industry in North Dakota.

I don't know if Heckmann can do it alone in North Dakota or if Heckmann and ONEOK create a joint enterprise to set up the refueling stations. Wouldn't it be a hoot if Love's partners with them? It wouldn't be the first time Love's re-invented itself.